Canon Inc. has announced that its board of directors today resolved to enter a basic agreement to acquire shares of NEC Machinery Corporation (Securities code: 6344, listed on the Second Section of the Osaka Securities Exchange ("NEC Machinery")), a subsidiary of NEC Corporation ("NEC") through tender offer (the "Tender Offer"), and to acquire ANELVA Corporation ("ANELVA") shares held by NEC (the "Stock Acquisition").

If the Tender Offer and the Stock Acquisition are realized as stated below, NEC Machinery and ANELVA will become consolidated subsidiaries of Canon Inc.

Since 1996, Canon Inc. ("Canon") has assiduously striven to achieve excellence as a global corporate entity under its Excellent Global Corporation Plan. Under this plan, the company has undertaken a wide range of business process reforms, including the implementation of the cell production system in the area of production reforms, and the introduction of 3D computer-aided design in the field of development reforms. As a result, Canon has increased consolidated sales and net income by approximately 1.7 times and 6.2 times, respectively, over the nine years from 1995 to 2004, and has become No.1 in the world in many of its major businesses. Additionally, Canon has achieved a strong financial position enabling long-term investments, as well as research and development capabilities for the generation of new businesses.

Looking forward to the next ten years, Canon aims to achieve healthy growth by further developing its Excellent Global Corporation Plan. To achieve this goal, the company recognizes the need to create next-generation businesses and realize new levels of cost reductions. Accordingly, Canon views this year to be a year of preparation for the next set of long-term management reforms, and in July of this year a new R&D facility to generate next generation businesses was completed at the company's Shimomaruko headquarters in Tokyo.

To speed up the realization of new levels of cost reductions, Canon considered the technologies held by NEC Machinery and ANELVA, both subsidiaries of NEC, would prove highly effective, which led to the decision to acquire the two companies.

As NEC Machinery possesses advanced design and manufacturing technologies for automation equipment, Canon believes that the Tender Offer will contribute greatly to further advancements in its production reform activities, including the automation of production processes for Canon products. ANELVA, with its high-vacuum thin film deposition technology, is expected to make a significant contribution to the in-house production of manufacturing equipment indispensable to differentiate Canon products from the competition in various fields, including Canon's new display business.

Both NEC Machinery and ANELVA are engaged in the semiconductor manufacturing equipment business and other businesses. For the time being, both companies will maintain their current operation structures, working to strengthen their businesses while pursuing synergies with Canon's business operations.

NEC, the top shareholder of NEC Machinery and ANELVA, and Canon have enjoyed a cooperative relationship that makes effective use of each other's core strengths in such areas as the production of custom IC chips, and will further increase cooperation in the future. Accordingly, plans call for the working relationship that NEC Machinery and ANELVA currently shares with NEC to be maintained even after the two companies become subsidiaries of Canon.

With regard to the Tender Offer and the Stock Acquisition, and in light of the fact that the transactions can be expected to bring further growth and development to NEC Machinery and ANELVA, Canon has received NEC's consent to tender for the 3,120,000 shares (all shares to be tendered) of NEC Machinery held by NEC in a Tender Offer, and to transfer all shares of ANELVA. Furthermore, in light of the fact that the transactions can be expected to bring further growth and development to NEC Machinery, Canon has also received the consent of NEC Kansai, Ltd., the second largest shareholder of NEC Machinery and a consolidated subsidiary of NEC, to tender for the 1,120,000 shares (all shares to be tendered) of NEC Machinery held by NEC Kansai, Ltd. in a Tender Offer.

In addition, the Board of Directors of NEC Machinery passed a resolution supporting the Tender Offer on August 25, 2005.

Although NEC Machinery shares are listed on the Second Section of the Osaka Securities Exchange, the Tender Offer is not intended to result in the de-listing of the shares of NEC Machinery. However, Canon has not established the maximum number of shares to be purchased through the Tender Offer. Therefore, depending on the results of the Tender Offer, it is possible that the shares of NEC Machinery will be de-listed following prescribed procedures pursuant to the Criteria for De-listing of Listed Shares of the Osaka Securities Exchange. At the time of any de-listing, Canon would consider the conversion of NEC Machinery into a wholly owned subsidiary through stock-for-stock exchange.

(Note) The ownership ratio has been calculated based on the total number of the Target's outstanding shares of 7,870,800 shares (as of March 31, 2005).

The Tender Offer Price of 1,212 yen per share was determined by taking into consideration various factors including the market price of the Target common shares, its financial and asset status, the number of shares to be purchased, and the valuation conducted by Canon's Financial Advisor (Nomura Securities Co., Ltd.). The offer price represents approximately a 20% premium to JPY 1,010, the average closing price of the Target shares in ordinary trading on the Second Section of the Osaka Securities Exchange for the last 1 month to August 24, 2005, inclusive.

The board of directors of the Target has passed a resolution supporting this Tender Offer.

The Tender Offer and the Stock Acquisition will have no material effect on Canon's financial results for the fiscal year ending December 31, 2005.